Economic Theories and the Music Industry - Essay Example

Economic Theories and the Music Industry XXXXXXXXX XXXXXXXX XXXXXXXX XXXXXXXX XXXXXXX The music industry is one of the most advanced sectors in numerous fields for the high role that it plays in the life of many. Music has been used ever since age old times to assist in the expression of emotions that a person may bear. Another role that music has played is in the relaying of information that affects the society in a particular manner. There is also the vast use of music for entertainment and pure relaxation. Musicians have made a living out of selling their music formats and thus the identification of the importance of the industry. However, of contemporary times, the sales of music formats have fallen continuously. It is the fear of many that there will lack and industry in this sector after some years and this can gain attribution to several economic theories. One of the standing economic theories in the identification of this is Market Anomaly. The key aspects of this theory are that there is inefficiency in the sales of a particular product in a given economic sector may depreciate and go against efficient market hypothesis (Fabozzi, 2011, 71). There are two main reasons that lead to market anomaly and they are ranges in two spectrums, the structural factors and the behavioral aspects. Focusing on the structural factors, one of the key components is unfair competition. The music industry is one that has undergone numerous changes over the years and thus the need to keep up with the changes. The changes have been caused by the development of Information Technology and thus the necessity to keep up with current trends in the creation of music formats. This necessity has led to different people in the various music sectors to develop a competition culture bases on the goal of most market sales. However, this unfair competition has led to their loss of customers rather than an increase and this is based from the fact that they focus more on the quantity of music produced to outdo each other rather than the quantity (Fabozzi, 2011, 125). The customers do not care about the quantity of music formats produced but rather on the quality. When customers find the quality not appealing to their needs, they decrease their focus on the particular music and spend the money in another manner. Unfair competition also comes up based on other entertainment industries rather than music. A major competitor in entertainment is the movies. The movie industry also started a long time ago and the amount of developments that the sector has witnessed over the past decade goes nothing short of overwhelming. Many movie directors have invented a lot of technology that has drawn more attention to entertainment fans. An example of this is the introduction of 3D films that give the viewer a livelier experience while watching a movie. Upon the introduction of the aspect, the music industry is in a fast search to develop a new concept in terms of music formats that will outdo the theatre developments (Robert, 2012, 153). This form of competition is healthy but of contemporary reports, it has led to various rivalries developing between music producers and movie directors and this has not had a positive impact on music formats. Another factor in the theory that affects the sale of music formats negatively is market transparency. In this case, not many people recognize the various genres of music formats that society is willing to offer due to less publicity made by the responsible promoters (Nilsson, 2010, 63). Less promotion by advertisement is one conflict that has hit markets in the 21st century and the credit for this goes to the high amount of inflation that the current global market is facing. The less the promotion made the more anonymous music formats are in society. This is one contribution to the poor music market figures in the 21st century. Moreover, regulatory actions for various music formats by authorities have led to a decrease in the number of sales over the past few years. Authorities intervene on the types of music formats to sell and this has led to numerous losses by the various artists. In addition, societal regulation by the rules set by norms to follow affect the sales of the music formats (Nilsson, 2010, 145). Some music formats stated by various people in society as to have immoral characteristics and the technological products used in their manufacture stated as destructive to the buildup of ethics. An example is the new music age by acclaimed artist, Jay Z that many state to have illuminati messages. Behavioral economics have been a great constituent of the market anomaly theory. The prospect theory in terms of behavioral economics attempts to explain the factor using a cognitive psychology view. It stated that the purchase decisions made on a particular item come because of the customer analyzing the various other prospects and risks involved upon purchase of the product. In the contemporary world, the creation of most music formats is in a bid for customers to buy for entertainment. However, the customer putting all points to consideration, the market conditions have not been conducive enough to offer space for entertainment. It is from this factor that the customer decides to use the money for other uses that mostly comprise basic needs. Monetarism is another theory that has had an impressive role to play in the low sales volume of music formats. This concept has the ideology of the government always regulating the amount of funds out in circulation (McKee, 2008, 167). The government does this through various means and the most widely used manner is by increasing the banks’ lending rate. This one factor has led to many people having issues regarding the use of money and despite the fact that they are always willing to purchase new music formats and this situation curtails their activities. With the current economic trends, banks have had to continue increasing their lending rates to preserve a substantial amount of money as float balance. If this condition continues, people will allocate their attention to the purchase of more important commodities leaving the sale of music formats to very few. The decreased purchase will lead to a collapse of the industry. The theory of natural limits is a theory recognizable in relation to the market issues regarding the sales of music formats. The theory states that every product or genre of products has a certain determined number of years at which it can sustain a natural consumption level. However, after the expiry of that period, the convincing of consumers on the purchase of the products despite the various improvements made in the sector becomes exceedingly difficult. This in economic terms gets referred to as innovation saturation. In the music industry, innovation saturation has been a key concept that has affected the industry negatively. Evidence of this is that over the 20th century, music received much acclamation from people due to the amount of information that it passed on to listeners and the role that it played in ensuring that people had an easy life. Music in the era had important messages that people could rely on in the making of various decisions in life. Moreover, soul music was very implemental in ensuring that people were always relaxed and had a simple lifestyle (Nillson, 2010, 103). However, in the 21st century, different genres of music have come up with different formats all in an effort to entertain with anterior motive of profit for the artists. The welcoming of the music has not always been proper and several people opt to remain with the previous ones. The theory of value is one very important theory in understanding the diminishing sales value of music formats. The theory states that for a commodity to gain economic value, two factors have to stand. One of the factors is that the commodity must be in limited supply and that it must be important in the satisfaction of human wants. According to the theory and in relation to music, music formats have not been in limited supply. On the contrary, every year generation of different formats said to be much better than the predeceasing one happens. The music formats in this case pile up and there is no limit to the number of them produced over a certain number of years. The increase in number of formats goes against the value theory because the higher the number of music formats, the lower the economic importance of the commodity (Blaug, 2010, 57). Paying attention to human wants, contemporary music does not satisfy them. The perception of music is as an added advantage in an effort to increase the amount of luxury that people have. This then makes the music not a very vital aspect to humans and thus the amount of credit offered towards the purchase of the music formats decreases significantly. Moreover, the fact that the music of the new age is full of messages that the older generation tends to differ about shows the extent of this. Another theory that has led to decreased amount of sales with regard to music formats is the core competency theory (James, 2010, 19). The theory is both a management and economics theory and has three key aspects to uphold in its analysis. The first criterion is that imitation by competitors is rare. The theory comes into play in that the current trends in the music industry do not follow the criteria and thus the difficulty in increasing the amount of sales. In the contemporary world, many issues have come up regarding imitation of songs and other tracks by renowned musicians. This has gained recognition from the vast amount of piracy reports that have come up with the creators of the original music claiming that they had not offered the various imitators the right to copy their music. This factor has led to a lot of rivalry in the music sector and the subsequent low sales volume of music formats. Another aspect of the theory is that the commodity under review does not remain in the market for long. However, music is a contemporary issue ever reused in an effort to identify better methods of production (Keynes, 2009, 461). People also play music repeatedly if it appeals to their needs and if it offers satisfaction, the lesser the need to purchase more music formats. The final aspect upon which this theory stands is that for optimal market utilization, the product must appeal to the consumers experienced advantages. This statement seeks to verify that consumers already have to already had prior experiences to the commodity as very many new age consumers do not want to try out any new commodities because of fear of satisfaction. The fear of satisfaction is whereby the consumer may not get the same satisfaction as he may have accrued from a previous commodity and thus finds the purchase of the dissatisfactory commodity as a waste of money. This same case applies to music formats as the consumers fear testing out new formats from the fear of dissatisfaction and thus only purchase music of a similar genre to the habitual one (Smith, 2011, 41). Another theory used in the analysis of the low sales of music formats is the theory of market saturation. According to the theory, every industry has two phases in its lifetime. There is both the uptrend and the downtrend. The uptrend is the phase in its lifetime where there were many profits from very many sales established in the particular market. Then there follows the downtrend comes thereafter where the sales are at a low down. The later condition of the markets is determined by customer decisions. In the music industry, the uptrend phase came in the 1990s where there were many genres of music with hip-hop being the major one. The industry was booming in those years as people had a characteristic charisma in which they identified with music entirely. However, the 21st century has seen a very great change in this that is the downtrend condition of the market (James, 2010, 43). With the current embedded notion about music from societal norms, the sales volume of music formats may remain stagnant a factor that will lead to decreased numbers of production and eventually collapse of the industry. The other theory that affects the industry is the diamond model theory that states that the competitiveness of a certain company is determined by the amount of effort that other companies in the industry put. The theory in relation to the music industry has it that the various sales made by different genres of music gets determined by the competitive genre. When one genre is highly competent in the market, the rival genre also gets active and increases competition. However, at the point where competition is less stiff, there is some form of market relaxation (Gorlash, 2011, 9). This leads to poor quality products that have led to decreased number of customers in the contemporary world. It is important to understand the various forces that the market has played in the continuous decrease of sales volumes for the music products. The various economic theories assist in the comprehension of the negative attributes that the market has and thus it is very vital to deal with the problems at an earlier time. With this comprehension, changes can be made in the sector for optimal results in terms of sales. References Blaug, M. 2010. The Theory of Value. Economic Theories in Retrospect. New York: Palgrave Macmillan. Daniels, P. 2010. United States Interest Rates. Trading Economics. Retrieved on 25th April 2012 from http://www.tradingeconomics.com/united-states/interest-rate Fabozzi, F. 2011. The Theory and Practice of Investment Management. New York: McGraw Hill Publishers. Ghosh, D. 2011. Economic Theories: The Past and the Present. Massachusetts: Taylor & Francis. Gorlash, D. 2011. Market Economics in Relation to Consumer Interests. Journal of Studies in Economics and Econometrics, 2(35), 1-14. James, M. 2010. Sizing the Economic Theories. McKinsey Quarterly, 4(31), 18-21. Kaufman, A. 2011. Behavioral Economics. Journal of Business Ethics, 3(102), 421-438. Keynes, J. 2009. Theory of Natural Limits. Economics of Employment, Interest and Money. New York: Cengage Learning. McKee, B. 2008. New Monetarism: New Edition. New York: Cengage Learning. Nillson, A. 2010. Market Transparency Theory. London: Oxford University Press. Robert, Z. 2012. Myths of the Trade of Policy. Harvard Business Review, 3(90), 149-153. Smith, A. 2011. Changes in the Economic Doctrines. Scarlett. Retrieved on 25th April 2012 from http://www.economictheories.org/ Read More